Bansko phenomenon – prices and developments

Bulgarian properties market trends research, carried our in June by the Industry Watch Group, about the Bulgarian property market trends in 2005 has concluded that the Bulgarian property investments market is entering a process of stabilisation and segmentation. Bulgarian property development has been the most profitable business in Bulgaria in 2004.

On average property prices in Bulgaria, during 2004, have grown 48% (!!!). This was the highest property market growth in the world. For the Bulgarian capital Sofia, the growth was 26%. Some Bulgarian property market segments have experienced growth several times higher than the national average. Sofia property prices have grown with 11.3% for Q4 2004 and are stabilising during 2005 at about 10-11%, around €700 – €1,000 per sq.m. Similar is the pattern for Varna and Burgas is slightly lagging behind. The highest growth in 2005 is expected in the small regional centers.

The main driving force for the Bulgarian properties prices growth is the credit expansion of Bulgarian banks, now offering accessible mortgages to everyone. The growth in mortgages underwritten in 2004 is 150% reaching BGL1.0 billion (€0.5 billion), which is 2.7% of the GDP. This, however, is still significantly lower than the average European or American levels, so this trend will continue during the next few years. Interest rates have gone down with 1.59% on average during Q4 2004 and are now comparable with their European counterparts.

Another factor fueling Bulgarian properties market boom is the strong Bulgarian property investments from Bulgarians living abroad (about 1 million from population of 8 million), as well as foreigners. During the last 4 years these investments grew from €14 million in 2001 to ?123 million for Q1-Q3 2004, which is 11.4% of the Bulgarian property market. This effect is further increased by the monthly transfer of €100 million from Bulgarians living abroad to their relatives and family, part of which is reinvested in the Bulgarian property market.

According to the study the prices have reached relatively high levels in the big cities (€800 – €1,400 per sq.m.) and will enjoy a more moderate growth during 2005. The bank crediting will continue to grow, sustaining the property market growth, until reaching European levels. The continued interest in investing in the Bulgarian properties market from foreigners and Bulgarians living abroad will continue to affect and sustain the price growth.